选定路向 迎难而上

Ronald Nimmo

Jan. 16, 8:09 a.m.

My comment is about this excerpt:
The “invisible hand” of the market is millions of people making their own individual choices. Do we choose to rent or buy a house because one choice is better for the national economy? Why do some companies or unions support trade barriers and tariffs? Because they know that given a free choice individuals will buy the products of companies from “foreign” sources, and they persuade politicians to limit the choices of consumers to protect their own incomes, either by forcing them to pay more for foreign products or to buy inferior, locally made products. “We need to protect our jobs, don’t we?” Even if it means we all pay more for products.
Source: JohnMauldin.com (http://s.tt/158aq)

John is a “free trader” and globalist who extols the virtue of having cheap goods to buy vs. buying one’s own “inferior and overpriced goods” But many of the goods we buy from China are not just second rate, but dangerous, such as food, toys, and pharmaceuticals. They also steal industrial and military secrets from us any time we give them access to our technology. Free trade must be fair trade and we must also protect our intellectually created assets such as military and industrial technology. If our people do not have jobs to provide sources of income, they will not be able to buy even the cheap imported goods that Wal-Mart sells. As John has so ably pointed out, the government has reached the end of its ability to compensate for the destruction of private sector income.
  John tries to visualize where the next wave of growth will come from 5-10 years from now. But it, too will only be of temporary benefit if we allow our innovation to exploited by the globalists and and stolen by thieves. Most of the excesses of labor unions, such as in GM, have been pared away but the lavish rewards to management and financial manipulators who take a share of the national wealth far out of proportion to any wealth they create for the economy continues, seemingly unabated. John has complained about many unsound Wall Street practices, but he does not see how globalism and unfair “free trade"are like cancer, which is the growth of of genetically corrupted cells which the body’s immune system is unable to destroy, eventually threatening the life of the entire organism.

Tim S

Jan. 11, 12:32 p.m.

A balanced and perceptive analysis as ever, though I think you might want to revisit your financial text books for a reminder of the maths behind an equity rights issue, given your implication that Unicredit was forced to issue equity at a 40% discount.

Rights to subscribe to new shares are awarded only to existing shareholders, giving them the “right” to contribute new capital to the business and not see their shareholding diluted. If this rights price is less than share price, then the rights thus have a tradable value (the difference between the two prices), which can be sold to non-holders (or in the case of the Italian equity market, auctioned off).

The price at which these new shares are pitched is thus (almost) irrelevant, since the percentage of the business owned by shareholders remains the same, even if the headline share price is significantly adjusted once the shares go ex-rights. The change in share price is offset by a change in share count.

Thus the fact Unicredito has launched a rights issue at a 40% discount means little, if anything, for the equity value of the business. It certainly isn’t reason behind the subsequent fall in the share price, which is much more to do with surprise at the sheer scale of the fundraising, and deepening gloom on the ability of the eurozone and its banks to dig themselves out of the hole they are in.

Mark Snyder

Jan. 9, 3:52 p.m.

Hi John,

While I like to think your predictions of a reset within 5 years are accurate, I do not think you are giving adequate consideration to the effects of oil scarcity.  It is a fact that we have extracted the easiest 50% of oil already, and that no new energy source has even a small change of replacing it anytime soon.  We can study the periods from the 19th century, or even the Great depression, for clues as to how economies can reset from massive deleveraging events.  But there has never been a period of meteoric growth worldwide like we have seen in the cheap oil era of the last 100 years or so.  Because of this, the heights from which we must fall are that much higher than they ever have been before, and the perception of pain felt by societies as they fall will be so much more.  Resource wars, massive unrest, and geopolitical conflict in ways we have not contemplated before are virtually guaranteed.

Unfortunately, though we are maybe 3-4 years into this right now, we are just in the first inning of a full nine-inning game, I fear, and, as yet, I cannot point to a single constructive step taken by any government or central bank that moves us in the right direction - can you?  I fear the drame has only just begun.

C Lang

Jan. 9, 12:08 p.m.

there is simply not enough new cash being generated by the fiat system to feed all the previously existing bonds, rents, etc.

the bankers either need to figure out how to stuff 10X cash into the actual economy - to liquify the assets

or they need to prepare for asset prices to fall to pre 1980 levels - and just deal with the consequences.

Jennifer Watson

Jan. 8, 5:49 p.m.

Jennifer Watson, Boston
Excellent and down to earth, John! For the U.S., there is no mystery in what needs to be done first: rein in the financial sector so that it doesn’t kill the economy and then the currency! Then decide that our nation is more important than the profits of global companies. All pointing to the oligarchy taking some losses!

Walter Bruno

Jan. 8, 10:02 a.m.

Dr. Walter Stolber, Switzerland
Congratulation, Mr. Mauldin, to a fine analysis-overall conclusions to which not only a studied economist can agree with, but “normal” folks. too. Unless that is, you were a Nobel laureate, called Dr. Paul Krugman, who does not tire to resurrect Keynes anti-cyclical dogma to combat today`s structural predicaments. So, for example in a recent ( 92/01/12) article in NYT “Nobody understands debt”.
Following a humble reply to the professor pertaining to the subject, issues at hand. It may be of interest to you. ( As my comments were not published, the reply period had been closed, no copy- right restrictions apply):

“Certainly, it greatly matters who is holding national debt: locals or foreigners. Thus, Greece and some other countries with high external debts are considerably more exposed to market vicissitudes than countries with similar or even higher indebtedness, held primarily by local subjects. To boot, USA has the exceptional advantage that the dollar has become and still is universal currency. This fact alone broadens US capacity to borrow by a factor Y compared to all other countries. However, it also increases the country`s vulnerability in case of global disorders beyond control affecting markets` trust and confidence.
Where Dr. Krugman`s analysis seems failing is in the implicit assumption that historical levels of indebtedness would provide benchmarks for acceptable levels of debt today and in future. This is not the case, The question where is the limit of public debt cannot be answered numerically. Instead, when trust in borrowers` repayment capacity starts to evaporate in international markets, interest and other signals galore, policy is overdue to pacify unruely markets with confidence building measures.
Whether deficit-spending policies à la Keynes will do the trick, Krugman`s philosophy, too,  thus adding additional debt to the stock of public debt- or whether confidence would be restored best by consolidation policies ie, increasing public savings by cutting public expenditures and increasing taxes, raising public efficiency, has become a matter of ideology.
This economist no friend of ideological bastions adheres to the concept of “it all depends”. Are resources in the economy un-underemployed, is there a structure at hand that the additional funds would generate efficient results or do they have a negative muliplier, high opportunity costs, what are the economic and political; security risks of consolidation policies - just mentioning a few of cost-benefit deliberations required to minimise potential risks of policy failure.
Analysis outcome and recommendations might entail a combination of measures concentrating on savings and efficiency improvements in the public sector combined with “measured” public growth policies.
Certainly, Dr.Krugman would raise to the task by being less orthodox and a little more pragmatic”.

P.S. Just an afterthought-. Your abbreviated version of events above . ..“turned into the Taliban and helped train and arm a young Saudi named Osama bin Laden. And then along came 9/11 and the wars in Afghanistan and Iraq” may need differentiation.  Events linking 9/11 to the Irak required “ingenuity” by the Bush administration and the power to set it in motion against a swathe of the world`s opinion. Many forks in different stages were at hand to avoid the resulting fiasco.
W. St.

Walter reed

Jan. 8, 12:36 a.m.

Regarding your brief history lesson regarding Iran; the reason the CIA overthrew Moussadeq was because Moussadeq wanted more income from Anglo-Iranian Oil Company .... not because they were afraid Iran was going communist…....“threat of communism” was a dishonest rationale used by USA all over the world to do bad things.

Bruce Rae

Jan. 7, 9:48 p.m.

John, your current article is interesting and enlightening as usual, and I look forward to next week’s column. However, in my view, a major problem is reflected in your statement: “but Mr. Market is going to stand over us and force us to clean the room”. Source: JohnMauldin.com (http://s.tt/158aq) This seems to imply that Mr. Market is a wise and prudent parent when, in fact, it is comprised of the major financial institutions around the world who may be concerned about a clean room in their casino, but couldn’t care less about the children.

Of course, governments, who are supposed to possess some wisdom, should provide the checks and balances on the casino so the children can receive some positive nurturing and guidance. But, they are like the grandparents who are well-intentioned, but are also happy to relinquish any final responsibility. Moreover, the parents are usually happy to tap the wealth of the grandparents through any hand-outs they can get, including any insider-trading information to gain an an edge against their competitors. Capital is king in a “free” market and we know who has the most capital. Therefore while the financial institutions rule, and there are limited restraints on their trading freedom and profits, I see the situation in the West being: “business as usual”.

Governments could create employment and stimulate economic growth by subsidising new employees for the development of existing small businesses. Of course, this would require business plans and performance measures, and has been done in New Zealand before. It should be done again instead of bailing out scores of bankrupt and fraudulent “finance” companies which operated with no productive performance measures or, in some cases, no prior successful business experience.

The costs to expand an existing business are far less than creating a new one, and investment in such businesses is likely to be far more productive and positive than extending credit to banks which are happy to profit from it without passing it on to the productive sectors. Mr. Market has no interest in managing the
economy for the benefit of children as it is only interested in it’s own gain. For example, is it true that the circulation of money in the USA is at it’s lowest level for years, in spite of QE1 & QE2? While financial institutions hoard money and trade against one another, they are happy to see productive businesses struggle to survive and lay off employees. In any major economic adjustments where businesses have to respond to new market conditions, do banks actually change their operations that much in response to the new normal? Certainly, in the latest recession, they’ve just relied on another handout from the grandparents.

Keep up the good work!
Bruce Rae

Jeffrey Goodrich

Jan. 7, 9:02 p.m.

Whether “Greeks” are better off staying with the Euro (at the cost of higher taxes and reduced public services) or leaving the Euro (at the cost of a bank collapse and import inflation) depends on which Greeks we’re talking about.  A Greek banker, insurance broker, government official or corporate executive will certainly prefer the former, as it maintains his/her income and/or asset values in a globalized economy.  A Greek hotel employee, manufacturer or real estate broker will likely prefer the latter, as it would boost tourism, make exports more competitive and increase sales volumes from foreign buyers.

If I were Greek, I would vote to leave the Euro.  this is because the only just solution to any economic crisis should visit the “pain” most heavily on those who either benefited from the phoney credit expansion and those whose policies caused it.  In Greece’s case, that is the former group, not the latter.

Bud Wood

Jan. 7, 1:22 p.m.

John: 

In an interview with you, Simon Black opined that you have one of the most perceptive mind regarding macro trends.  It certainly seems that his opinion is correct.  My compliments!

My own view is more subjective.  Where one lives on a time line seems much more important than are the macro trends.  Sure, we talk of the depression of the 1930s; that’s interesting but from my viewpoint, when my family’s fortunes reversed during that time, my entire life was thrown into disarray.  Subsequently, I faced military service during WWII; again, although some minor choices were available, there were no real choices.  My point is that each of us is more like a cork floating in a turbulent sea than is any one of us like individuals who have rational choices.

At this point, I conclude that our grouping together creates problems.  Most Europeans seem to be suffering from a mistaken view of grouping, subjecting many individuals to hard times.  Like I say, it depends upon when one lives on a time line. In any event, it seems that smaller political entities can be much more “humane” in that problems will be recognized well before they become so overwhelming.  Thus, decentralizations can benefit most of us.  Maybe that will be in our “collective” futures.